Another Day in Debt History

Ready to be a part of debt history? You’re going to be soon… like it or not.

The U.S. government announced yesterday it will auction a record $104 billion in debt next week. Despite obvious warning signs that the world has had its fill of American paper, the Treasury will forge ahead: $40 billion in 2-years Tuesday, $37 billion in 5-year notes Wednesday and $27 billion in 7-year garbage on Thursday.

They must “get it.” Last week’s sharp rise in 10-year yields was as sure a sign as any that investors everywhere are getting cold feet. A prudent government would take a break… let things cool off. But there’s no rest for Uncle Sam, or his Treasury. They’ve got the mother of all Ponzi schemes to run:


The government chalked up a $189 billion budget deficit last month alone, another record and the eight-straight monthly deficit. We suspect they’d love to take a break from force-feeding the market notes and bonds, but they can’t… the Treasury will have to auction $2 trillion in debt this year just to keep the lights on.

(An interesting aside… funny how government savings started circling the bowl at the precise moment the gold standard was abandoned.)

“Note the absence of 30-year bonds in this auction,” adds Dan Denning (link)from his Aussie perch. “Whether by design or by accident, this confirms that U.S. borrowing is become a lot more interest rate sensitive. Creditors, we think, are beginning to shy away from lending to the U.S. at fixed rates for longer than 10 years. They want their money back before the value of their investments is inflated away by quantitative easing. This makes funding U.S. debt more expensive…and vulnerable to a spike in yields.”